Correlation Between American Tower and Equity Commonwealth
Can any of the company-specific risk be diversified away by investing in both American Tower and Equity Commonwealth at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining American Tower and Equity Commonwealth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Tower Corp and Equity Commonwealth, you can compare the effects of market volatilities on American Tower and Equity Commonwealth and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in American Tower with a short position of Equity Commonwealth. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Tower and Equity Commonwealth.
Diversification Opportunities for American Tower and Equity Commonwealth
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Equity is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding American Tower Corp and Equity Commonwealth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity Commonwealth and American Tower is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on American Tower Corp are associated (or correlated) with Equity Commonwealth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity Commonwealth has no effect on the direction of American Tower i.e., American Tower and Equity Commonwealth go up and down completely randomly.
Pair Corralation between American Tower and Equity Commonwealth
Considering the 90-day investment horizon American Tower Corp is expected to generate 0.2 times more return on investment than Equity Commonwealth. However, American Tower Corp is 4.88 times less risky than Equity Commonwealth. It trades about -0.04 of its potential returns per unit of risk. Equity Commonwealth is currently generating about -0.08 per unit of risk. If you would invest 23,239 in American Tower Corp on December 5, 2024 and sell it today you would lose (2,278) from holding American Tower Corp or give up 9.8% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Tower Corp vs. Equity Commonwealth
Performance |
| Timeline |
| American Tower Corp |
| Equity Commonwealth |
American Tower and Equity Commonwealth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Tower and Equity Commonwealth
The main advantage of trading using opposite American Tower and Equity Commonwealth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Tower position performs unexpectedly, Equity Commonwealth can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Equity Commonwealth will offset losses from the drop in Equity Commonwealth's long position.| American Tower vs. Digital Realty Trust | ||
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Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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